Hiring can be expensive. 

It’s expensive in terms of time for leaders to commit to an effective hiring process, it’s expensive in terms of recruitment fees or costs, and it’s expensive in terms of productivity. And that’s when you get it right!

Sometimes we can make mistakes when hiring, and this can be even more expensive. Perhaps busy executives are skipping steps or they might not know what things to avoid.

This week we talk about five expensive hiring mistakes you should avoid.

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EPISODE TRANSCRIPT

Please note that this episode was transcribed using an AI application and may not be 100% grammatically correct – but it will still allow you to scan the episode for key content.

 

00:13
Kevin Lawrence
Welcome to the Growth Whispers podcast with Brad Giles in Perth, Australia, and Kevin Lawrence in Vancouver, British Columbia, Canada. We’re here and we’re going to talk about bill building enduring great companies for the 156th week in a row. Brad, we just hit three years. We’re just chatting about that a minute ago. Three years consistently of doing a podcast. We know most people, most of us have a hard time doing anything for a year on a weekly basis. Yeah, three years is a big milestone for us.

00:49
Brad Giles
Most people struggle to get to February when they set their New Year’s goals. We’ve got accountability partners in each other, which is why every week we got to do it.

01:06
Kevin Lawrence
Exactly. As I said before, I wouldn’t have done this without you because I’m accountable to you and you’re accountable to me. We’re not going to let each other down. Obviously, in collaborating makes things work better as well.

01:18
Brad Giles
Yes, what I love is when I look back at all of the other the older episode and it just feels like such an asset. What I mean by that is we’ve learned from each other. We’ve put that out there. People can go out there and they want to find out about, I don’t know, profit, PEREX or any one of the many things that we’ve looked at. We’ve got that out there and people can go through and look through to figure out what are they interested in it. It’s really nice to have that asset out there.

01:49
Kevin Lawrence
Yeah, 100%. It’s good to feel like we’re always making progress and thousands of people a month are listening to this and getting value out of it. So we’re glad that we’re able to. Again, thank you for your partnership on this, Brad. Something that started in COVID, right? We started doing this in COVID, has continued beyond it, which is pretty cool. All right, well, let’s dig in today. What’s your word, phrase, feeling, thought, philosophy of the day?

02:18
Brad Giles
Celebrate. I guess celebrating like, our anniversary today. I was referring back to a book by Chip and Dan Heath, The Power of Moments. Last week we did an episode about our top 912 16 books. Yeah, one of the ones that didn’t make the cut was The Power of Moments. We celebrate birthdays, anniversaries, there’s no reason that we can’t make ourselves celebrate moments that are of importance within our organizations. What are the significant moments in your firm and how do you celebrate them?

03:03
Kevin Lawrence
Yeah, awesome. I love it. Mine is diversity, and it’s interesting. Had a conversation last week with a bunch of CEOs and talking about the value of getting different opinions in the room. Now, it’s challenging because I heard about in one country they were legislating at senior leadership of large companies that it needed to be 75% women on those teams. I didn’t fully get the full background on story, and I got to dig in and get the facts. It’s like diversity helps to make better decisions, whether it’s diversity of race or background or experience, and it’s proven many ways. It’s just people are stuck in old ways of doing things sometimes. The value of diversity and how do we create it in a way that is beneficial for all the people involved? Just different perspectives, different opinions, different experiences. Yeah. So diversity. Basically, ma’am, we got two in a row, sewing it together pretty easy, like celebrating diversity, right.

04:11
Kevin Lawrence
Or celebrating and enhancing things with diversity. Okay, awesome.

04:17
Brad Giles
Let’s talk about hiring mistakes. They can be expensive, can’t they? Hiring mistakes?

04:24
Kevin Lawrence
Excruciating. Excruciating.

04:27
Brad Giles
There’s just so many stories. What we’re trying to do today is to narrow down and to kind of look through, out of all of the stories that we’ve seen, what are five expensive hiring mistakes to avoid? How can we distill all the stories and put them into five buckets so that we can say, right, this is what you don’t do.

04:51
Kevin Lawrence
We all have had the experiences, oh, my gosh, the tens of millions of dollars that we’ve seen burnt in front I mean, personally, I’ve seen burnt in front of my own eyes by having the wrong people coming in. It’s not because people don’t intend to, and it’s not because we don’t want great people. It’s just really hard and really easy to make mistakes on this. Unfortunately, often we put the least amount of time into it. We put less amount of time into it than other decisions that are bigger, and they’re very hard to undo. Right. Hiring a person is sometimes like starting construction on a new tower, a new 50 story tower. Once you get going, it’s hard to redo it again. Let’s dig into these mistakes and we’re going to share them. There’s more, but these are the ones that we see. And the number one, for a lot.

05:46
Brad Giles
Of people, there’s just one thing kev, sorry, I wanted to just mention in the prep you said something, I think it was from Peter Drucker. We spend the least amount of time on hiring decisions and they are the hardest to undo. Just for framing.

06:01
Kevin Lawrence
Yes, it is. And I thought it was Drucker. I couldn’t find the source, but it was someone like Drucker who said it could be. Yes, it’s very painful once we do it, and we don’t put enough time into it typically. So five points, number one. The first is you’re not clear on greatness and clear enough on what amazing looks like in the role. Basically we set our sights too low. Not clear enough in terms of what it is, but really, we don’t shoot high enough. One CEO said, look, if we could hire anyone in the world, the best person in the world, and we had infinite cash, who would we hire for our new head of marketing, and someone says, we’d probably hire the CMO from Nike. Okay, well, that’s a good place to start. Right. They’re putting their sites up and getting clear. Then they got into why.

07:00
Kevin Lawrence
So one site is high enough. That’s critical. The other piece of it is getting specific on what does the person actually need to thrive in that role with us. So, for example, we brought a sales leader into an organization. They were an A player sales leader, where they were amazing, but they were in a business with an 18 month sales cycle and about a $5 million average ticket sale. They came into a business that was a daily sales cycle, probably a two hour sales cycle, and a $50,000 sales average ticket. They came into the Auto business. They came from heavy equipment into Auto. He was an amazing guy, but he wasn’t the right type of sales leader because he’s used to a totally different type of sales. We didn’t get down to and when they recruited the next person. Okay, great. It’s sales leader, multilocation two hour sales cycle, $50,000 average transaction value conception.

08:08
Kevin Lawrence
They boiled down into the type of person who had done similar transactions. Just those kinds of details and getting clear on what really we need from someone to win.

08:17
Brad Giles
Yeah. One team that comes to mind, they were, I guess, flatlining their growth, and they said, we need a business development manager to come in. They were professionals at what they do in their field of expertise. Sales wasn’t the norm in their industry, and so they didn’t really know what they wanted to know, what greatness was, and they didn’t really know what the results would be. Subsequently, the results that they didn’t know is what they achieved. Right. Yeah. Second one, a person hired a general manager COO eight weeks into the journey, this person hadn’t looked at QuickBooks, which was their accounting package for the previous six weeks. Part of their job that was, I guess, defined at the outset is that they needed a report from QuickBooks every week.

09:22
Kevin Lawrence
Yes. Another side, on the positive side of this, one of our clients is looking to hire a president for their organization. They did a lot of work building a scorecard of exactly what the role was because they never had one. They were so clear on what they needed. They had three candidates that they knew were possible, and the guy said he went and had lunch with each of those different people because he was networking himself to build the to recruit. And, after lunch, he loved them all. Yeah. Came back and went through the scorecard. Two of them instantly were eliminated because he was so clear on what he needed. All right, so mistake number one, not clarity on what greatness looks like in that role.

10:03
Brad Giles
Sorry, the answer is a scorecard you need a scorecard, look top writing or look to Onboarded for scorecards.

10:11
Kevin Lawrence
Right? It’s a scorecard and thinking big about an amazing person, not just an okay person, awesome. Number two, just hiring somebody, that’s convenient, right? It’s someone that it’s a neighbor, it’s a friend, it’s a colleague’s, neighbor, colleagues, friend. And it’s really calm. It happens a lot, and it can be good, but generally, because them, the bar is a little lower. I’ve made these mistakes myself a couple of times, and it’s just you can’t lower the bar. One company I was with and the CEO said, yeah, no, I just hired one of my college buddies. He’s a great guy. He plays hockey, he’s got awesome experience, and blah, blah. I said, did you run him through the process? No, I know. He’s awesome. And they go, Great, here we go. We meet the guy. In the first meeting, I wanted to tell the guy to not come back at lunch.

11:12
Kevin Lawrence
And he wasn’t rude. He was like, chill. He was almost like the stereotypical kid with the silver spoon. He didn’t really want to work hard. He was more interested in the baseball scores and what was going on his phone than he wasn’t really coming to make a contribution. Now, he stayed like a year. Took a while to move him out, respectfully, but he was convenient. He just wasn’t amazing for the role. It’s doubly hard because now you got to fire your buddy or your brother in law or whatever it happens to be.

11:44
Brad Giles
The problem is that this is biology. We are designed to operate in tribes where we trust the people that we know, okay? If you’re in a tribe and this person says, this person is good, why? Because they didn’t kill the other tribe members, then you’re going to be thinking, okay, I trust that person, too, but we’re not in tribes anymore. Now we’re in a society, and we’ve got to know that just because your instinct says, who do I know that is not following the process? There’s one CEO to that point who stopped their growth plans. They had pretty ambitious three year targets, and they seemed to be going well, but they were like, look, we can’t continue to grow because we don’t know anybody. We know everybody in the industry, and we’ve tapped out everybody that we know. There’s no one else that’s worth hiring.

12:40
Brad Giles
Okay. That’s not necessarily the right reason to stop your growth plans.

12:48
Kevin Lawrence
No, I’d say not. The root of it is that just making the mistake of just hiring what’s easy and convenient and as you said, Brett, over trusting. Over trusting referrals from other people. When people say, oh, yeah, I know we got so and so, we’re going to interview them, but another executive had referred them or something else, and I’m like, that doesn’t mean anything. Another CEO referred them, it doesn’t mean anything. You still have to double scrutinize even more scrutinize them because there’s an additional relationship risk in that hire. All right, so that was number two, hiring someone that or is convenient or is recommended. Three, under investing time. Basically it’s a big investment and we’re so busy, and most senior leaders and CEOs don’t put enough time into this. Whether it’s on new recruitment piece or even the interviewing piece, it’s easy. And it’s easy to delegate this.

13:47
Kevin Lawrence
For senior hires, we have to be involved. A number of the CEOs I work with are amazing master recruiters. They are amazing. One, we sometimes jokingly call him the Chief Employment Officer because he is the best recruiter in the company and he recruits all over the place and he works with recruiters himself. It’s almost 1000 employees, but he’s on it and he’s driving all the time and he’s always got a list. He’s prospecting like a good sales guy would, or salesperson would. Pardon me, but a lot of people just try to leave it to HR, and that’s not the way to do it for these senior roles. He was telling me recently, one person that he’s hiring another executive, when were looking for a certain role, said, I think I know someone I heard about in the industry. I met this guy once, he goes, well, what’s his name?

14:49
Kevin Lawrence
He calls, speaks to the guy, ends up working with him. That guy referred another guy, which is that’s how it works in his world. He was talking about being at a conference and in the lineup at lunch and at lineup at lunch. The guy in front behind him, when they said, what’s your name for the reservation? There was something they were going in, and the guy goes, oh, are you from that company? I heard about you guys. He starts talking about them digging in, and now he’s probably hiring that guy, too.

15:21
Brad Giles
Awesome.

15:22
Kevin Lawrence
Yeah. He’s just constantly recruiting and he puts a lot of time into it.

15:28
Brad Giles
The thing that you kind of glossed over there was this is a big investment, you said it, but Brad Smart in Top Grading says that it’s 15 times the annual salary if you get it wrong for a senior executive.

15:44
Kevin Lawrence
Right.

15:45
Brad Giles
Even if it’s a bit less than that, or even if you’re a smaller company, it’s a massive investment. How much time, let’s say that your executive is on $200,000 and a mistake could cost you 600 or $2 million or whatever it might be. It’s a huge amount of money. When you add everything up, how much time should you spend to make sure that investment is the right investment?

16:15
Kevin Lawrence
Yes, it’s at least a few million bucks. When you’re hiring an executive, the impact on a business, plus or minus. That’s worth, you would do other things that you would put time on other things that are worth less than a couple of million bucks.

16:27
Brad Giles
Often, yeah. So think about it like this. You could be buying a machine worth a couple of million bucks if that machine has a chance of not working in 90 days. You’d want to do some more due diligence on that machine. And that’s what we’re saying.

16:39
Kevin Lawrence
Yes. Awesome. That was number three under investing the time. Under investing time compared to the size of investment it is, and it deserves a lot of attention or leaving it up to other people. The next is that we’ve talked about this in a lot of other episode, but it’s not digging deep enough and basically judging the book by its cover. I call it being brand blind in some cases. Like, it’s dangerous. Oh, yeah, they worked at Apple or they worked at, whatever so many times, because then we drop our defenses. It’s almost like your point about the tribe, Brad. We think they’re pre validated. I had one of my CEOs, they hired this person, and he had an MBA from one of the most prestigious business schools, and he had experience at another very prestigious company, and he was so excited. Yeah, I got this guy, he’s an MBA from this company, and he went to work from that school pardon me?

17:35
Kevin Lawrence
From this company, and he got excited. No, I hired him. He’s fine. I don’t need to do a deep drive. Look at where he came from. There’s always a bell curve in every industry. There’s good doctors and bad doctors and mediocre doctors. There’s good scientists and bad scientists and mediocre scientists. There’s good teachers and bad teachers and good accountants and bad accountants and good executives and bad executives. Just because they came from somewhere, it doesn’t mean anything. People just not dig in deep enough. Whether it’s assessments or proper deep, three, four hour interviews to really understand them, checking references, all that good stuff. I know, Brad, you got lots of examples on this, too, because we spent a lot of time on this.

18:25
Brad Giles
Yeah, obviously, references are a function in the hiring process for a reason. If you’re not ringing the references, you’re doing yourself a massive disservice. Part of upgrading is understanding who did you report to and what will they say when we talk to them? Going back, like, ten years. It’s quite detailed for the right role, it’s got to be appropriate to the role. There’s one case where CEO had two candidates for a senior executive role, and the recruiter said, we got to pick one quickly or they’ll go they’ll be gone. You need to jump on it. I’m saying, look, we need to slow down and make sure that we’re confident in the decision. Sure, you could carve out some time in your calendar or whatever, but we need to be sure. We want them to be sure as well.

19:23
Kevin Lawrence
Go straight ahead, but go over. I finish.

19:25
Brad Giles
Two months later, were back hiring again because they picked quickly, they picked the wrong person, they didn’t dig deep enough.

19:38
Kevin Lawrence
If you’re spending two or three or $5 million, are you going to make a decision under duress? I hope not. With this sometimes scarce, it kicks in and with the references, it should be the hiring manager, the person talking to, because you’re understanding the person, validating what came out of the interviews and thinking it through and are they going to be a good fit for you. So yeah, that’s key. The other one in the digging deep is seeing their skills in action. If they’re an accountant, give them a messed up PnL or cash flow and get them to fix it. Pay them for their time, but bring them in, don’t let them go home and have someone help them with it. Right? It’s like students in university do exams in the room with supervision so they can’t get external help. Give them a project they can do and see them in action.

20:29
Kevin Lawrence
If they’re a writer, get them to write. If they’re a salesperson, get them to do a role play, whatever it happens to be, even if their interviews are good. Basically do as much digging in as you can based on your multimillion dollar investment.

20:45
Brad Giles
Again, I guess there’s one other quick story. There one leader got an external recruiter. They looked at external recruiters as being their HR department and they had an internal HR department as well. They would get external recruiters to do all the interviews and then have their HR department do the final with only a very short meeting with them at the end. That’s all fine and well, right?

21:11
Kevin Lawrence
You may think that you’re not fine and well, that’s crazy.

21:15
Brad Giles
That’s all fine and well if that’s what you want to do, but it comes with a consequence, right? If you think that your time is more valuable than that, the consequence for this person is they were stacked full of C players and toxic A’s, people who didn’t align with the values.

21:31
Kevin Lawrence
Like, we use recruiters because we need people to do the labor of recruitment on our behalf. But their business model conflicts with yours. Right. They get paid by placing and you accepting where we’re the one that has to deal with them and we need recruiters and they’re not bad people, but their business model is different. It’s like trusting the commission salesperson. Sometimes it can be, can work out, and it cannot. Depends a lot on the person. Recruitment is hard and you doing more diligence is hard. Yeah, it’s almost like getting your realtor to be your home inspector. It kind of doesn’t make sense. How’s it going? Not digging deep enough and there’s always more and we have lots of tools. I know Brad and I, we talk about this a lot on the show. I put a lot of energy into this because it saves a lot of headaches.

22:26
Brad Giles
Number five is scarcity. Number five is scarcity. You touched on this before. What does that mean, choosing between one candidate and none at all?

22:38
Kevin Lawrence
Yes.

22:39
Brad Giles
Well, look, this is the candidate who’s there. They seem like they’re good enough. We need someone to fill the role. Why is this a problem?

22:54
Kevin Lawrence
Kev well, the thing is that generally many of the hiring mistakes that we see happen is that when people were down choosing between one and none, and so then you got to go back to the well and start again, and it’s another one, two, three months to get the right person. So people generally compromise and just settle. Ideally, you’re down at the end with two awesome candidates trying to choose between the two. That makes the best decision. When there’s only one and you end up still having all that responsibility without any help, you’re more likely to settle. And settling leads to pain.

23:34
Brad Giles
About 15 years ago, I needed a warehouse manager, someone who could manage our stock and inventory incoming outgoing goods. Look, it’s a competent position, but it’s not an executive position.

23:46
Kevin Lawrence
Right.

23:47
Brad Giles
Went to market, and we had and I said to them, I like to upgrading. We need about 50 applicants. Like, you’ve got to go cast a wide net, and we need a lot of people apply. Went through and went through a series of interviews, and we got to the end, and I said, it’s not good enough. We haven’t got the right candidate. We need to start again. And so the HR manager agreed. Went and we started again, and went through the whole process again and got an even wider net and more candidates. Eventually we ended up with someone who was quite good and competent, and they did the job really well. If we would have picked someone our last scarcity, even though went to 50 candidates the first time around, we just wouldn’t have had that confidence and high level at the end.

24:41
Kevin Lawrence
Yeah, were doing a recruitment for a sales leader for a company that I work with an excellent recruiter, like one of the best we’ve ever worked with. And were down. We had one candidate that was really good and could have done the job, but the CEO was like, I don’t think this is our guy. So he went and pushed back. The recruiter is like, this guy could do it and would be good CEOs. I know. So the CEO pushed back. They went and did a whole other batch and came back. In the end, were able to choose between the two. We chose a different guy who turned out amazing, but it takes courage sometimes to push back and ask for more. It’s sending a meal back in a restaurant. There’s a social tension that some people have a hard time with and then they end up having to settle.

25:27
Kevin Lawrence
Scarcity is dangerous on a wider net. It goes back up to recruiting yourself and putting time up at the top of the funnel, getting good candidates to start with. We got a couple of bonuses here. Number one, not clear on greatness and what it looks like. Setting your sites high enough and knowing what they really need to thrive. Two, hiring someone or that’s convenient or that was referred. Three, under investing time with you and your team to really make this happen don’t dig deep enough and you judge the book too much by its cover and don’t really understand them deeply. Five, Scarcity kicks in and you just grab someone versus holding out for and ensuring that you get greatness. So we got a couple of bonuses. You want to do yours first. I got one I was thinking about as were doing the show there.

26:17
Kevin Lawrence
Brad sure.

26:19
Brad Giles
After those hiring mistakes, one other is Onboarding. Clearly we’ve spoken about the onboarded book today, and we spoke about it last week in the nine Books every CEO must Read episode. If you do a great job of hiring and you do a terrible job of onboarding, like most companies do, this is a very expensive mistake. Onboarding should validate whether this person is a successful fit in the company, because spending 90 days with someone is going to give you a much greater sense than spending a few hours with someone interviews where they’re really trying to sell themselves. So bonus one is onboarding.

27:00
Kevin Lawrence
Yes. The idea with that too, to make sure brand I mean, it’s your book, but I think the key piece is people also don’t put enough energy into those onboarding and invest enough time and energy with them alongside them to help them to be successful. That’s why I was so excited you wrote that book. Bonus two is overpaying. You’ve got pay bands and to match what you need to. And there’s two problems with overpaying. First of all, recruiters might want you to because it’s easier to recruit for more money. I’ve seen some CEOs get talked in some compensation packages don’t make sense. Note to self, if someone’s coming to work for you and they’re overly concerned with compensation, that tells you something. I was talking to the CEO actually, recently, and he was saying that when he recruits, he says he will never pay a dollar more than they are currently making.

27:57
Kevin Lawrence
He goes, we have a great purpose led company with a spectacular opportunity. I want them to come because they buy into our vision and what we’re doing and what we’re about and who we are. I’m not going to bribe them in. I’m going to get them to buy in, was his view. That’s a hard thing to stick to. Basically, overpaying or bribing people to work for you is a dangerous thing, because if they’re that coin operated, there’s a reasonable chance they might continue to be coin operated down the road.

28:30
Brad Giles
Very good. So a few interesting mistakes to avoid. There hope that you have enjoyed today’s episode of The Growth Whisperers. Hiring mistakes to avoid. My name is Brad Giles. You can find me@evolutionpartners.com Au, where I’ve got a weekly newsletter you may potentially be interested in. Look, it’s a range of thoughts and ideas every week that you can supply practically to your business. That’s at Evolutionpartners.com Au, you can find that. Kevin also has an interesting newsletter every week. You can find him@lawrenceandcode.com with his newsletter. You can find us as well on The Growth Whisperers on YouTube, just by searching if you’d prefer to see our smiling faces. No matter where you catch us, we’d love it if you could rate our episodes. The ratings matter a lot to us. Hope you’ve enjoyed this week’s episode and look forward to chatting to you again next week. Take care.